Accelerated Electric Vehicle Growth Brings Along With It Tremendous Investment Opportunity
The electric vehicle revolution is coming at us faster than we could have ever imagined. Less than a decade ago it was laughable to zip by in the latest Toyota (TM) Prius hybrids, and today it is almost unheard of for a large manufacturer to not offer an e-vehicle alternative. Tesla (TSLA) paved the way for the industry with their sleek design and advanced technology, and it paid off big for investors, nearly quadrupling in price in a four-month span from October 2019 to February 2020. General Motors (GM) looks to become a major player in the revolution, recently hinting at multiple electric powered vehicles (Figure 1) some of which could be released within the next year.
(Figure 1) General Motors Released A Teaser Video Outlining An Array Of What Looks To Be Their Newest Upcoming Line Of Battery Powered Vehicles
This innovative area is ripe with potential, and following a broader market pullback, many of these big auto industry names are trading at an incredibly cheap valuation. Do not be fooled, though, there will be winners and losers in this shocking battle and I will help to decipher and choose the best strategy to profit from the steady shift from fossil fuels to clean energy automotive.
This select group of past and future winners provide options to investors looking to expand their electric vehicle portfolio.
Tesla is a leader and pioneer for the industry. They have undergone scrutiny for around a decade now and investors have finally been seeing solid returns. Tesla’s bullish case is that the company has a strong portfolio (Figure 2) of high growth vehicles and products and has recently begun turning out positive cash flows. The company has diversified off into solar as well with roof tile panels that could be a game changer if costs can be brought down.
(Figure 2) Tesla Now Offers The Model S, Model 3, Model X, Model Y, and Various Solar Options
Tesla has plenty of upcoming catalysts, one of which being the highly anticipated Cybertruck (Figure 3). This could expedite growth even further as record orders came in following the announcement of the futuristic pickup truck. Consumers have shifted towards purchasing SUVs and trucks as opposed to smaller cars, and it will be interesting to see if this holds true for electric options as well.
(Figure 3) The Tesla Cybertruck Is Expected To Be Released In Late 2021 And Is Unlike Anything We Have Ever Seen On The Road
Tesla is a necessary part of any e-vehicle investor’s portfolio as the stock maintains Wall Street analyst price targets of over double the price where it currently sits. Though, with great opportunity comes heightened risk. TSLA’s stock is not for the faint of heart, but should pay off in the long term for patient investors who can bear with the extreme volatility that is almost always present.
General Motors has been hit hard by coronavirus shutdowns, down nearly 50% from highs just months ago. This comes as a nice discount for electric vehicle enthusiasts as the company plans to vastly expand their battery powered options over the next ~4 years (Figure 4). General Motors could potentially revolutionize and revitalize their entire brand with this move contending with Tesla for e-vehicle king.
(Figure 4) Rumors Have Begun To Circulate As To What GM’s New Line Of Electric Vehicles Will Have To Offer
The company has had issues brought forward by analysts and may not be in buy territory just yet with virus fears and shutdowns still looming, but once we see sentiment shift and a bottom put in, it could be all uphill for GM as the stock now offers value and growth potential for long-term investors.
GM has also begun to cut out underperforming sedans and this could have a positive impact on returns in coming years as well.
Toyota Motor Company
Toyota has braved the macroeconomic headwinds much better than most, down less than 30%. The stock is one of the highest rated in growth and profitability compared to peers and boasts price targets as high as $180. TM is the safest play in the race to alternatively fueled vehicles in my opinion and offers unique options such as their hydrogen fuel cell powered Mirai (Figure 5).
(Figure 5) The Mirai, Though Still Expensive, Comes With A Range Of Benefits From Toyota
Toyota has been and will remain a leader in producing cost effective hybrid models and this will fuel growth and earnings for years to come. They are not the flashiest or most exciting play, but offer some of the most sustainable gains in the industry.
The company, along with others, recently announced they were pushing back the dates they plan to reopen plants, so discounted entry points could still be on the horizon for Toyota and company.
These stocks have struggled in recent years to produce gains and offer little hope for electric vehicle growth and therefore should be avoided in my opinion when looking to invest in alternatively powered automotive.
Fiat Chrysler (FCAU) has struggled over the last year. The stock has cut over 60% of their price and has few positive catalysts in sight. One of the company’s only e-vehicle options, the Fiat 500e gets just 84 miles per charge (Figure 6). This will need to increase if they are to compete with the 300+ mile ranges many of the big names now offer.
(Figure 6) The Fiat 500e Is Catering To A Small Group Of Buyers And Will Need To Be Improved If It Is To Compete With Leaders Like Tesla
Fiat Chrysler does offer extreme value at current prices with a price to earnings ratio of just over 2.5x, so there is potential for short-term returns, but with Ram pickups being their only real out-performer, the company will need to capitalize on every opportunity to sustain any gains long term.
Volkswagen (OTCPK:VWAGY) is another vehicle manufacturer that has struggled of late, and their progress in the electric vehicle field does not look to be the way out. The company has introduced a line of concept cars (Figure 7) indicating they may be looking to enter into the e-vehicle race, but that is still years out.
(Figure 7) Volkswagen’s Unique Line Of Concept Cars Offer Futuristic Designs And High Mileage, But Could Still Be A Long Way Off Of Production
Lawsuits will continue to drag on the stock as excess assets will not be available to VW for some time, meaning developments in electric will be slow in comparison to peers, making this stock an avoid for the time being for investors looking to expand their battery powered vehicle portfolios.
These stocks have not fully taken off, but offer the potential for electric vehicle investments in time to come.
Ford (F), like GM, has struggled with continuing growth over recent years. Their introduction into the electric business with the Mach E (Figure 8) has provided excitement, but may not be what consumers and therefore investors are looking for. The stock still has good value, and if the company can bring a production electric F-150 in for the right price, they could move their way into the electric vehicle winners category very quickly.
(Figure 8) The Electric Mustang Which Becomes Available In 2021 Is Very Unique, But Only Time Will Tell If It Can Take Off
NIO Limited (NIO) is known as the younger Tesla equivalent of China. The company offers some very cool vehicles (Figure 10), but has struggled with financials and funding. The stock offers some of the most potential out of all the discussed names, but also comes with the highest risk. NIO is a gamble, but the potential reward may be worth a small position for those interested in battery powered automotive.
(Figure 10) The EP9 Is One Of The World’s Fastest Electric Cars And Shows NIO’s Capabilities Of Producing Innovative And Powerful Designs
Overall Investment Summary
With virus fears and shutdowns bringing about huge pullbacks throughout the auto industry, we have never seen more value. Electric vehicles and autonomous driving could greatly accelerate auto manufacturers earnings and sales over the next decade offering significant growth as well. With just about every auto production company entering into the e-vehicle race, it can be hard to choose which will post the best gains. Therefore, diversification may be necessary. Allocating a small portion of your portfolio towards electric and autonomous driving and then diversifying that portion with a number of winners will allow you to profit from the slow transition from fossil fuels with minimal risk. Tesla offers the most potential growth, GM both growth and value, and Toyota value and consistency. With these three winners, you cannot go wrong. Ford and NIO both offer potential with their own risks as well, but steer clear of laggards such as Fiat Chrysler and Volkswagen if you are looking for electric growth.
Electric and hydrogen power are the future of automotive and it is not a matter of if they will take off, but exactly when (Figure 11). Investing in the industry long term could provide consistent profits that outpace the broader market for years to come.
(Figure 11) As Electric Vehicles Become Cheaper And Fossil Fuels Deplete We Will Begin To See A Shift To Alternatively Fueled Transportation
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in TSLA, GM, TM, F over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Markets are extremely volatile at this time, but offer significant upside opportunity in the long-term. This unique strategy should be fortified with ones own due diligence and research.